Intraday Market Update
The S&P 500 futures took a dive in the overnight session on the heels of slowing import growth data out of China, an unexpected drop in US Q2 non-farm productivity, and another monthly deterioration in US small business confidence. Meanwhile, multiple downgrades of Intel (-4.2%) overnight didn't help matters either. The S&P 500 gapped -10 points lower at the open and was down -16 points before the selling stopped. All of the major indexes are now firmly in the red and are trading in fairly tight ranges ahead the FOMC announcement this afternoon at 2:15 PM EST. Commodities are under pressure in the wake of a bounce in the US dollar which is higher by +0.80%. Overseas, equities in the Asia-Pacific region were led lower by -2.89% sell-off in China's Shanghai Composite Index. Meanwhile, all major European markets were lower giving back some of yesterday's gains.
In the preliminary reading of Q2 non-farm productivity a +3.6% increase in hours worked outpaced a +2.6% increase in output, making for a -0.9% q/q decline in productivity and ending five straight quarters of growth. The headline number missed estimates that called for a +0.1% increase. A revision to Q1 productivity was revised +1.1% higher to +3.9% which softened the blow a bit. Labor costs also rose which ended three straight quarters of declines, however, hourly compensation fell. Weakening productivity isn't a big surprise given the string of recent reports indicating slowing growth, but today's report underscores the uncertainty of the recovery.
In other economic news, the National Federation of Independent Business (NFIB) Small Business Optimism Index declined for the second straight month to 88.1 in July from 89.0 in June. The report is similar to last month in that the weakness was evident in the number of firms reporting plans to hire and those firms expecting the business conditions to improve in the next six months. Other weakness was seen in firms planning to increase capital spending, easing of credit conditions, and positive earnings trends.
In equities, Intel set a negative tone in the technology sector as multiple downgrades came after reports of soft channel checks in Asia. The semiconductor sector is getting hit hard again on the news with the SOX index down -3.5%. Netflix (NFLX) is up +6% after they announced an agreement with EPIX this morning through which Netflix members can instantly watch an array of new releases and library titles from EPIX streamed over the Internet from Netflix. NOTE: UBS reiterated their Sell rating on NFLX with a $90 target. UBS says the deal with EPIX will lack new releases and large dreamworks deals will be too expensive.
CRM software developer Convergys (CVG) is down -2% after the firm missed earnings estimates in its Q2 report. Novel (NOVL) is down -1.75% after the firm revised its Q3 revenue outlook lower. Shares of Gartner (IT), an IT consulting firm, are up +9.5% after they beat estimates in their Q2 report. Executives said there is strength across the business and expressed confidence in the firm's ability to sustain earnings and revenue growth over the long term. JA Solar (JASO) is down -9% after they beat revenue estimates but missed earnings in their Q2 report.
Core Sector List:
NOTE: I have expanded my list of core sectors from 16 to 20. The additions are Telecommunications, Real Estate, Natural Gas, and Coal.
Overall reading: 16 sectors advancing, 1 sectors declining
Strongest Sectors: Utilities, Pharmaceuticals, Healthcare
Weakest Sectors: Coal, Semiconductors, Home Construction
S&P 500 - Daily and 30-minute Intraday Charts:
Dow Jones - Daily and 30-minute Intraday Charts:
NASDAQ - Daily and 30-minute Intraday Charts:
Russell 2000 - Daily and 30-minute Intraday Charts: